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Braxton Enterprises currently has debt outstanding of $35 million and an interest rate of 8%. Braxton plans to reduce its debt by repaying $7 million in principal at the end of each year for the next five years. If Braxton’s marginal corporate tax rate is 40%, what is the interest tax shield from Braxton’s debt in each of the next five years?

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Keith Leannon
Keith LeannonLv2
28 Sep 2019

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Braxton Enterprises currently has debt outstanding of $50 million and an interest rate of 7%. Braxton plans to reduce its debt by repaying $10 million in principal at the end of each year for the next five years. If​ Braxton's marginal corporate tax rate is 30%​, what is the interest tax shield from​ Braxton's debt in each of the next five​ years?

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